November 14, 2018 / 8:14 AM / a month ago

Singapore Airlines finds premium economy a tougher sell on new non-stop U.S. flights

SINGAPORE (Reuters) - Singapore Airlines Ltd (SIAL.SI) is facing no problem selling business-class tickets on its ultra-long non-stop flights to the United States but is having to price premium economy seats very attractively, a senior executive said on Wednesday.

FILE PHOTO: Singapore Airlines planes are pictured on the tarmac at Changi Airport March 28, 2018. REUTERS/Edgar Su

The carrier last month resumed after five years the world’s longest commercial flight, an almost 19-hour non-stop journey from Singapore to New York.

The airline ordered seven new ultra-long-range twin-engine Airbus SE (AIR.PA) A350-900ULRs fitted with just 67 business class and 94 premium economy seats for those flights and for non-stop services to Los Angeles and San Francisco. These flights have no economy class seats.

It represents a major expansion in the U.S. market for Singapore Airlines and a test of whether the carrier can charge the 20 percent price premium that travel industry data shows is typical for ultra-long non-stop services due to their popularity with time-sensitive business travelers.

Singapore Airlines Executive Vice President Commercial Mak Swee Wah said there was existing demand for business class which he expected would continue to pick up.

For premium economy, however, he said some markets were not “entirely familiar” with the product, which offers more leg room and other amenities than economy class.

“I think we need to continue to stimulate and encourage the market to consider this product, initially with very attractive pricing, but eventually I think people will see that even at prices which we offer it is a good product to purchase because it is a very long flight,” he said at an analyst and media briefing.

His comments came after Singapore Airlines reported on Tuesday an 81 percent plunge in second-quarter net profit, hurt by higher fuel prices, lower airfares and non-cash losses at its part-owned Virgin Australia Holdings Ltd (VAH.AX).

Yields, a proxy for ticket prices, fell 2.2 percent in the second quarter compared with a year earlier, failing to help offset the impact of a 24 percent rise in fuel prices.

Singapore Airlines is offering premium economy fares as low as S$1,698 ($1,230.17) return from Singapore to New York for weekday travel over part of the peak Christmas travel period, according to its website.

That is in line with economy class fares from premium rivals like Hong Kong’s Cathay Pacific Airways Ltd (0293.HK) and Dubai-based Emirates that require a stop and a longer travel time, according to a Reuters search on Expedia.

When it previously flew to New York and Los Angeles non-stop on four-engined A340-500 jets that used more fuel, it had initially offered both “executive economy” and business class but later switched to all business class. Those flights were abandoned in 2013 when high fuel prices made them uneconomic.

A Singapore Airlines spokesman said on Thursday that the airline constantly reviewed its cabin configurations.

“However at this point we are confident we have the right balance with business class and premium economy class seating on our A350-900ULRs, and there are no plans to change it,” he said.

Reporting by Jamie Freed; Editing by Muralikumar Anantharaman and Stephen Coates

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